Franklin Resources Q1 Earnings Call Highlights

Key Points

• Franklin reported record long-term inflows of $118.6 billion and long-term net inflows of $28 billion, lifting AUM to $1.68 trillion (and $34.6 billion long-term net inflows excluding Western Asset), with broad-based public markets inflows led by equities.
• Alternatives remain a major growth driver: alternative AUM hit $274 billion and the firm raised $10.8 billion this quarter (including $9.5 billion in private markets), supported by landmark closes and the Apera acquisition that expand private credit and direct lending capabilities.
• Management reiterated a $200 million cost-savings target (about 20% achieved in Q1), expects operating margin expansion to the high twenties by Q3/Q4 under flat markets and long-term margins above 30%, noting 35–40% of expenses are variable for downside flexibility.

Franklin Resources NYSE: BEN executives struck an upbeat tone on the company’s earnings call for the quarter ended December 31, 2025, pointing to strong long-term inflows, record assets under management (AUM) across several categories, and continued progress on cost savings and operating margin goals despite a volatile macro backdrop.

Management’s view of the market and client demand

Chief Executive Officer Jenny Johnson said investors are navigating “continued transition” marked by global market turbulence tied to geopolitical trade policy and economic uncertainty. She said clients across regions and segments are increasingly seeking partners that can help construct portfolios across public and private markets, deliver personalization at scale, and provide disciplined guidance through complexity.

Johnson said Franklin Templeton’s platform—spanning public markets, private markets, and digital assets with distribution reach in more than 150 countries—aligns with those needs. She added that clients are engaging across multiple asset classes rather than purchasing “individual products in isolation,” a trend she said is evident in both the wealth and institutional channels as firms consolidate the number of asset managers they work with.

Flows and AUM: record long-term inflows and broad-based activity

Johnson reported the firm generated record long-term inflows of $118.6 billion, up 40% from the prior quarter and 22% from the prior-year quarter. Long-term net inflows were $28 billion, and AUM ended the quarter at $1.68 trillion. She said AUM rose from the prior quarter due to long-term net inflows and the acquisition of Apera, partially offset by net market change, distributions, and other items.

Excluding Western Asset Management, long-term net inflows totaled $34.6 billion, nearly double the prior-year quarter and extending the company’s streak to a ninth consecutive quarter of positive flows on a comparable basis. Management said record AUM was achieved in three of four asset classes.

In public markets, the company said equity, multi-asset, and alternatives generated $30.4 billion of positive net flows. Equity net inflows were $19.8 billion, including $24.6 billion of reinvested distributions. Management cited positive net flows across large cap value and core, all cap growth and value sector, international equity, equity income, and infrastructure strategies.

Fixed income results were discussed on both an inclusive and an “excluding Western” basis. Management said fixed income net outflows were $2.4 billion excluding Western Asset, while fixed income net inflows were $2.6 billion driven by Franklin Templeton Fixed Income. The firm cited continued positive momentum in multi-sector, municipal, highly customized, stable value, government, and emerging market strategies. Franklin also disclosed an institutional pipeline of “long, but unfunded mandates” of $20.4 billion.

Private markets, alternatives fundraising, and key platform updates

Franklin Templeton reported $274 billion in alternative AUM and said alternatives fundraising remains a significant growth contributor. During the quarter, the firm raised $10.8 billion, including $9.5 billion in private market assets. Management said fundraising was diversified across alternative specialist managers and reflected demand for secondary private equity, alternative credit, real estate, and venture capital across institutional and wealth channels.

Among notable product and platform milestones discussed:

• Lexington Co-Investment Partners VI closed in October with $4.6 billion in committed capital; Lexington AUM was described as $83 billion, up 46% since its acquisition in 2022.
• The firm highlighted the October first closing of the Apera Asset Management acquisition, which management said enhances European direct lending capabilities.
• In January, BSP Real Estate Opportunistic Debt Fund II closed with $10 billion of investable capital, including related vehicles and anticipated leverage across $3 billion of equity commitments.
• U.S. and European alternative credit businesses were aligned under an updated Benefit Street Partners brand, with $95 billion in private credit AUM at quarter end.

Management also said Franklin Templeton Private Markets—its alternatives wealth management offering—generated more than $1 billion in sales during the quarter. Executives noted Lexington, Benefit Street Partners, and Clarion Partners have scaled perpetual funds totaling $6.7 billion in AUM.

On the earnings call, Johnson said the firm has incorporated private assets into traditional mutual funds for over a decade and currently manages roughly 60 products representing about $160 billion in traditional mutual fund assets with exposure to private markets, adding that liquidity is continuously monitored.

ETFs, SMAs/Canvas, digital assets, and AI initiatives

Franklin reported continued growth in ETFs, retail SMAs, Canvas, and investment solutions. The ETF platform reached $58 billion in AUM and delivered $7.5 billion in net flows for the quarter, its 17th consecutive positive quarter. Management said net flows included $3.5 billion in mutual fund conversions and that active ETFs accounted for $5.5 billion, or about 70%, of total ETF net flows. Franklin said it now has 15 ETFs exceeding $1 billion in AUM.

Retail SMA AUM increased to $171 billion, with $2.4 billion in net inflows driven by Putnam, Franklin Fixed Income, and Canvas. Canvas generated $1.4 billion in net flows and reached $18 billion in AUM, which management tied to demand for personalization and tax efficiency.

In digital assets, Johnson said the state of Wyoming debuted the nation’s first state-issued stable token with Franklin Templeton-managed reserves. The firm reported digital asset AUM of $1.8 billion, including about $900 million in tokenized funds and about $800 million in crypto ETFs.

On AI, executives highlighted the launch of Intelligence Hub, an AI-driven distribution platform powered by Microsoft Azure. Johnson cited early internal productivity improvements, including a reduction in time to finalize call lists and improved meeting activity for distribution teams.

Expenses, margins, and financial items discussed

Franklin reported Adjusted Operating Income of $437.3 million, which management attributed to lower performance fees and annual deferred compensation acceleration for retirement-eligible employees, partially offset by higher average AUM and cost savings initiatives.

On expenses and margin outlook, CFO Matthew Nicholls said that at flat markets (and excluding performance fee compensation), the firm expects expenses to be in line with 2025, with investments offset by expense savings. He reiterated the company’s target of $200 million in cost savings, noting about 20% of that was recognized in the first quarter, with larger portions expected in the last two quarters of the fiscal year.

Nicholls also said 35% to 40% of expenses are variable and that the company has flexibility if markets decline. He guided that margin expansion is expected primarily in the third and fourth quarters, with operating margin expected to reach the high twenties by that point under flat-market assumptions. Longer-term, Nicholls referenced the company’s five-year plan, saying Franklin expects to be in excess of 30% operating margin by the end of the plan and suggested potential to reach 30% to 35% if strategic goals are achieved.

In second-quarter expense guidance, Nicholls said compensation and benefits are expected to be around $860 million, IS&T $155 million, occupancy $70 million, and G&A $190 million to $195 million. He also reiterated a tax rate outlook of 26% to 28% for the year, describing the updated view as the “lower to mid” part of that range.

On contingent consideration liabilities tied to past transactions, Nicholls said the remaining transaction-related contingent consideration is a very low amount (probability weighted), while certain transaction-related compensation is reflected in compensation expense and related GAAP vs. non-GAAP disclosures.

Management also discussed Western Asset Management, noting the Department of Justice decision not to pursue criminal charges helped reduce uncertainty. Johnson said Western had $6.6 billion in gross sales in the quarter despite continued outflows, and she cited investment team stability, performance, and integration of corporate functions and client service.

About Franklin Resources NYSE: BEN

Franklin Resources, Inc, doing business as Franklin Templeton, is a global investment management organization that offers a wide range of asset management solutions to institutional and individual investors. The firm's core focus is on delivering active portfolio management across equities, fixed income, multi-asset strategies and alternative investments. Franklin Templeton's product lineup includes mutual funds, exchange-traded funds (ETFs), closed-end funds, separately managed accounts and sub-advisory services designed to meet varying risk-return objectives and income needs.

Founded in 1947 by Rupert H.

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